New year, new you—new budget? As a time of reflection, renewal, and goal setting, the new year is a perfect opportunity to start a budget for the first time—or to take a look at your budget with fresh eyes.

Consider what’s worked, what’s changed, and how to make a budget with your annual plan and goals in mind.

How to Make a Budget That Works: Start With Your Goals

Some people are spurred to start a personal budget when they run into financial trouble or decide they’re not saving enough money. However, they may lose motivation once they’re in the clear or if they feel the budget is too constraining.

It may be easier to stay motivated if you start by identifying your goals and values and then build a budget that aligns with and furthers these deeper ambitions. New Year’s resolutions can be a good place to start.

A good budget will help you uncover where and when you’re spending money—and it isn’t necessarily about limiting yourself.

For example, you may find that you’re spending more money than you expected on dining out (a common finding for new budgeters). Rather than simply stating that you want to eat out less to save money, take the opportunity to build on your goals in your budget.

If you want to expand your business, you could eat out less and invest the savings from home cooked meals into your company. In doing so, you’re reframing the decision from an act of limitation to taking action toward achieving your goal.

Follow These Steps to Build a Budget

Once you have your goals listed, it’s time to create (or update) your budget.

Choose a System

Budget notebooks or spreadsheets work, but many people prefer to use budgeting software. Software is easier and quicker, allowing you to link your financial accounts and then import and categorize your transactions.

Software also does the calculations for you, helping you understand how much you’ve spent in different categories and how much you have left to spend each month. And the best software options can also create custom reports and offer a companion mobile app you can use to track and update your budget while on the go.

Figure Out Your Monthly Income

Start by determining your net income (how much money you receive after tax withholdings and paying for benefits), so you know how much you’ll have to work with each month.

If you own your own business, work on commission, or receive irregular freelance or contract pay, budgeting software can help you keep track of your financial flow and average your monthly earnings.

Choose Relevant Budget Categories

Next, create categories for your budget to track where your money goes each month. At a minimum, you’ll want categories for your monthly bills, necessary expenses, discretionary expenses, and savings. And from there, you can create subcategories.

For example, your monthly bills category might have subcategories for rent, utilities, insurance premiums, and loan payments. Food and transportation naturally fall into necessary expenses, while entertainment and travel often fall under discretionary expenses.

Don’t forget your goals. Say you want to build a college fund for your child or start meeting with a personal trainer and nutritionist to reach your personal health goals. Adding individual goals to your budget — and using your budget to make sure you save toward them each month — is a great way to stay on target and reach those goals.

Assign Your Money to Each Category

Next, start assigning your income to each of the monthly bills and necessary expenses. For variable bills, such as utilities, you can make an educated guess based on your usual usage during this time of the year.

Don’t forget your occasional expenses. You might pay for your car registration once a year, or insurance premiums every six months. Rather than getting surprised a few times a year, calculate the monthly cost and add that to your budget.

Once you’ve covered your monthly bills, necessary expenses, and savings goals review how much is left. Once everything is covered, you can better see what you can put toward your discretionary expenses.

Assess the Results

If you’re building a new budget, you may be surprised by how much (or little) money you have to assign to each category. Don’t get discouraged, this is where the power of having a personal budget lies. Knowing your numbers, you can start adjusting your lifestyle to align with your annual plan.

Perhaps you’d like more money for retirement, an upcoming trip, or discretionary expenses. Can you identify ways to lower your necessary expenses? Maybe you can shop around for less expensive insurance, end subscriptions you rarely use, or refinance debt with a lower-rate loan. You can then reallocate the savings to categories that better align with your goals.

How to Stick With Your Budget: Stay Flexible

It can take a while to figure out how to budget variable expenses—and it’s even more complicated if you also have a variable income. Consider the first few months a testing period and make adjustments until you can figure out how to create a budget plan that works.

You may find you need to cut back or increase your income if you want to maintain your lifestyle while achieving your goals. Or, you may decide that a short-term sacrifice is worth freeing up money for your future.

It’s also important to stay flexible even if you’ve been budgeting for years. Your goals, income, and expenses change over time, and you can take this as an opportunity to reassess your assumptions and update your budget.